Retail Earnings: Summer's Slow Sales Will Roll Into Fall After the holiday season of 2009 and a stronger-than-expected spring, the doldrums have hit summer even harder than usual.

As merchants wound down second-quarter reports, the talk was shot through with disappointment at the slow pace of the economic recovery and a sense that retailers will have to work hard to wring out more sales from the upcoming Halloween and year-end holidays. The word "promotional" was bandied about quite liberally in analyst conference calls: Advertising, product launches and special events will be on the rise in fall.

"All retailers must face the realities of the current macro environment. The consumer is more price sensitive than ever and the environment is highly promotional," said Thomas Johnson, co-CEO of Aeropostale (ARO). The teen apparel chain reported a 21% increase in second-quarter earnings and held to its previous guidance for the second half of the year, despite the economic outlook.

But several other merchants toned down their sales and earnings forecasts, fearing sales will fall short of their rosier forecasts in the first quarter. That group included BJ's Wholesale Club (BJ), JC Penney (JCP) and Kohl's (KSS).

It's the Economy

"There is no question that in Q1 we felt the economy was improving ... but Q2 gave us a very different feeling about the consumer's mindset," said BJ's CEO Laura Sen.

The club chain blamed price cuts in essential items it made to match Wal-Mart Stores (WMT) and supermarket chains for shrinking its average receipt by 1% and cutting into its profits for the second quarter. BJ's still managed a 4.4% increase in comparable sales -- for stores open at least a year -- and a 4.7% increase in earnings over the year before, thanks to increased traffic.

Even some merchants who raised their guidance acknowledged they did so in spite of the economy. Home Depot (HD) CFO Carol Tome said as much when the hardware giant boosted its outlook to call for comparable sales to rise 2.6% for the full year. When it made its previous forecasts, the company had expected average total per ticket to rise in the second half, but professional builders still aren't spending more, and that's dragging down the average receipt. Most of the sales growth this year will have to come from increasing the number of transactions, said Tome.

Weak Consumer Sentiment Means Harsh Competition

Many other merchants, including Target Corp. (TGT) also said traffic will have to be key to building up sales in the second half.

"It's really going to be about consumer sentiment and what's going to happen as we go into the third and fourth quarters from the economy standpoint," Target CEO Gregg Steinhafel told analysts.

Concerned shoppers are still spending less, so stores will work hard to boost traffic and ring up more of these reduced sales.

"We're preparing for the fall season to be a very competitive selling environment," said Mike Jeffries, CEO of Abercrombie & FItch (ANF). Jeffries repeatedly put off analysts' questions about specific merchandising and promotional initiatives, but CFO Jonathan Martin said the teen retailer is "prepared for an aggressive promotional environment" this fall.

With back-to-school sales starting to look a little iffy now, retailers are shifting their hopes to Halloween and the winter holidays. Target announced another "event" launch, a Costume Couture line for Halloween from designer Simon Doonan, available for a limited time limited time beginning Sept. 12 at selected stores. Limited Brands (LTD) said its Victoria's Secret chain -- which is also introducing a line of adult costumes for Halloween -- will advertise on television again in October to support a product launch.

Looking Ahead to the Holidays

All the merchants claimed they have prepared for the fall promotions and will do their best to protect their profit margins. But most admit that they will be under pressure, as labor and material costs rise and a shoppers' price sensitivity makes it nearly impossible to pass on those higher costs. The department stores reporting last week said as much.

The managers at Abercrombie & Fitch were most candid in admitting they will accept some margin erosion in the short term to build sales, but most merchants said they will try to hold the line on promotions to avoid a repeat of the devastating markdowns of 2008.

While no one was ready to share details, stores have already ordered the merchandise and are working on the promotional plans for the holidays, starting with the Black Friday kickoff on the day after Thanksgiving. But as both the economy and shoppers seemed to run out of steam this summer, retailers say they are leaving themselves some room to maneuver. Of course, four months before the holidays, no one wants to tip their hand yet, except to say they will not give their rivals quarter.

"We think the promotional environment is going to be more rational than it was Black Friday," said Larry Stone, COO of Lowe's Cos. (LOW) "But we can't control what our competitors may do."

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The whole idea behind holiday's is about spending time with family and friends, and NOT about how much time and money your spending shopping. Now, merchants on the other hand, would likely prefer your spend your time and money purchasing their merchandise. Nothing new about that. And lets be honest, no merchant can make enough money. So needless to say the merchants whining poor mouth, and sales are slow usual rant, will be starting very early. Ya just gotta ignore it, stay focused on family and friends. And keep your cash in your own hands, and credit cards put away.

August 23 2010 at 8:20 PM Report abuse rate up rate down Reply

It's been a sh*tty Summer and will probably be a sh*tty fall.

August 23 2010 at 7:33 PM Report abuse +1 rate up rate down Reply

remember that old song "Money, Money,Money"? what is that stuff ?

August 23 2010 at 7:04 PM Report abuse rate up rate down Reply

we all should go no vac 45 times or 75 times and spend spend more money and bail out banks, wall street, car company, but the american people like you and me lets tax more but we have obama care and our child could not pay all the money thatthis men is spending

August 23 2010 at 6:46 PM Report abuse +1 rate up rate down Reply

Many of the northern states hold a lot of people and most are saving and putting back for winter heating bills, they have trippled in the last 5 years. So many will not be spending this fall on nothing except the essentials, no extra stuff or you will not have enought to keep familys warm. Nation weather paterns service reserch says this could be one of the coldest winters yet, comming this year, because of the world wide drout. Better be ready.

August 23 2010 at 5:46 PM Report abuse +2 rate up rate down Reply

say it ain`t so

August 23 2010 at 5:28 PM Report abuse +1 rate up rate down Reply

Why have the jobs gone to asia? cheap labor,and they will work so much harder than the workers in this country so cheap labor,around $10 per day for working harder,NO BRAINER.Jobs are not comming back until we wake up.How many times have you heard in your place of employment,"No thats not my job,true it now belongs to an asian, who will never utter those words.WAKE UP AMERICA.

August 23 2010 at 5:08 PM Report abuse +3 rate up rate down Reply

Retailers who are smart will start discounting holiday shoppers early, right after Halloween, we all know they need to sell the stuff, so who can wait the longest, the shopper with money to spend on good deals, or the retailer who might be stuck with stuff he can't give away if he waits too loong, it's your money, shop smarter and save. Most of the stuff is made somewhere else anyway, quality is a thing of the past, cheap is what's happening.

August 23 2010 at 5:05 PM Report abuse +1 rate up rate down Reply

I don't know about all you other shoppers. But for the past 5 years I've done 95% of my shopping on the internet. Not only do I find the best prices on the items I'm looking for. In many cases I save on tax's, shipping costs and most of all on time and fuel that it would take me to go from store to store. The savings on fuel costs alone, have allowed me to have the extra money for a few additional, or nicer holiday gifts. That may not have other wise been affordable.

August 23 2010 at 3:44 PM Report abuse +4 rate up rate down Reply
1 reply to donovansdanes's comment

Plus you don't have to deal with traffic and crowded stores.

August 23 2010 at 4:33 PM Report abuse +4 rate up rate down Reply

You all state you want jobs, but, have you noticed the very people we trade with, such as Europe is trying to rid themselves of socialism. They spent themselves into bankruptcy and we have not learned a thing. We can't make jobs in America until we have people to sell to and obviously, the Europeans are broke too. Of course we have a Congress that allows the Chinese to manipulate ther currency and we can't compete against them. We have a gutless Congress and a president at never signed the front side of a paycheck in his life.

August 23 2010 at 2:29 PM Report abuse +3 rate up rate down Reply
2 replies to AL1PA's comment

Typical, Al, blaming Obama for the worst financial meltdown since the Great Depression. Try to get it right----concentrate, concentrate, that's it----it was the total loser, BUSH (remember it, concentrate ) that got us into it

August 23 2010 at 6:06 PM Report abuse -1 rate up rate down Reply

So jspe7, what did Obama and the other Presidents before Bush do to create jobs and stand up against the Chinese? Nothing. We can go back as far as Nixon, maybe further, and find the beginning of our gutless policies with regard to China. If you want to blame Bush, blame him for not changing anything with regards to this policy. And so far, Obama has done nor said anything about changing this policy. As far as Congress, they all deserve to be thrown out.

August 23 2010 at 6:51 PM Report abuse +1 rate up rate down Reply